Test Two Flashcards

Question

Job Costing Allocation Overhead Journal Entry

Answer 1

Debit: Work in Process Control Credit: Manufacturing Overhead Allocated Manufacturing Overhead Allocated is a contra-asset Allocated based on overhead application rate given Actual cost allocation base usage

Answer 2

Debit: Finished Goods Control Credit: Work in Process Control Debit: Cost of Goods Sold Credit: Finished Goods Control

Answer 3

Restate ALL overhead allocation entries in the GL using actual overhead, instead of budgeted cost rates Results in adjustments to all inventory and COGS amounts This approach is timely and allows for normal allocation throughout the year and then an easy “true-up” Makes adjustments to BOTH the job cost record and the GL/Income Statement

Answer 4

Spreads any under/overallocated overhead across WIP, Finished Goods, and COGS proportionally – but only on Financials/GL Allocates based on period-end or year-end balances (either totals, or specific allocated overhead balances) Take total book value of work in process, finished goods, and cost of goods sold. Find the percent of the total. Multiply percent by adjustment necessary.

Answer 5

Debit: COGS Credit: Manufacturing Overhead Allocated Typically used when over/under allocation is small relative to income levels

Answer 6

Budgeted Fixed Overhead - Allocated Fixed Overhead

Answer 7

Credit Manufacturing Overhead Allocated for the specific job

Answer 8

Major difference between the two is how much we average costs over the units of production

Answer 9

Direct Materials Conversion Costs - direct labor & overhead

Answer 10

The time of input changes the equivalent units when a good is still in work in process

Answer 11

1. Summarize Flow of Physical Units 2. Compute Output in Equivalent Units 3. Summarize Total Costs to Account For 4. Compute Unit Cost per Equivalent Unit 5. Assign Total Costs to Completed and Uncompleted Units

Answer 12

are a derived measure of output calculated by taking the quantity of each input in units completed and incomplete WIP and converting the quantity of input into a “theoretical” number of completed units

Answer 13

Debit: Work in Process – Mixing Credit: Cash (Accounts Payable)

Answer 14

Debit: Work in Process – Mixing Credit: Various Accounts (Cash, A/P, Depreciation, etc.)

Answer 15

Debit: Work in Process – Bottling Credit: Work in Process – Mixing

Answer 16

Cost of Goods Sold is Higher

Answer 17

Cost of Goods Sold is Lower

Answer 18

Calculates cost per Equivalent Unit of all the work done to date EUs Completed & Transferred + EUs in Ending WIP

Answer 19

1) Assigns costs of previous period WIP to first units completed 2) Assigns costs of EUs worked on during current period first to complete beginning WIP 3) Assigns costs of EUs worked on during current period next to start/complete new units 4) Assigns costs of EUs worked on during current period last to ending WIP Under FIFO, work done on beginning WIP is kept separate from work done during current period Costs per EU are only calculated using costs from current period and EUs of work started during the period

Answer 20

Weighted Average Pros: Easy to Calculate, More Representative average unit cost when prices fluctuate Cons: Makes difficult period to period comparisons of costs FIFO Pros: Info on costs in current & prior periods, better evaluate firm performance to budget Cons: More complex calculation

Answer 21

blends characteristics from both job-costing and process-costing systems

Answer 22

is an example of a hybrid costing system that can be applied to batches of similar, but not identical, products Specifically identifies Direct Materials used, but allocates conversion costs by process

Answer 23

refines a costing system by identifying individual activities as the fundamental source of indirect costs An Activity is an event, task, or unit of work with a specified purpose (e.g., designing product, operating machines, or distributing product)

Answer 24

is the idea that if a company undercoats one of its products, it must overcost another product

Answer 25

Replace use of broad-based averaging with more precise measurement of indirect costs Demand for refined cost systems has been driven by: 1) Increase in diversity of products 2) Increase in indirect costs with different drivers 3) Increase in competition in the market To refine a cost system: 1) Trace more costs as direct costs 2) Increase number of cost pools 3) Increase number of cost drivers

Answer 26

categorizes cost pools on the basis of different cost drivers, or degree of difficulty in determining a cost/cost driver relationship 1. Output unit-level Costs 2. Batch-Level Costs 3. Product Sustaining Costs 4. Facility Sustaining Costs

Answer 27

Costs of activities performed that vary with each unit of cost object Examples: Machine Costs Most exact

Answer 28

Costs of activities that vary with a group of units of the cost object Examples: Setup Costs, QC Costs Second most exact after output unit-level

Answer 29

Costs of activities undertaken to support individual products/services, regardless of units or batches Example: Design Costs, Engineering Costs, Storage Costs Second most broad after Facility Sustaining

Answer 30

Costs of activities that can’t be traced to individual cost objects Example: Insurance, Rent Expense, Depreciation, etc. Most broad

Answer 31

Companies allocating significant indirect costs across 1 or 2 cost pools All or most cost pools are identified as output unit-level costs Products make diverse demands on resources Products show small profit margins on products they are well-equipped to make Substantial disagreement exists with reported costs of manufacturing and marketing products

Answer 32

ABC requires A LOT of calculation ABC requires frequent updates to rates/calculations As cost pools increase, increased chance of misallocating costs If incorrect, or imprecise cost-allocation bases are used, could result in inaccurate/misleading costs Substantial disagreement exists with reported costs of manufacturing and marketing products

Answer 33

is the method of management decision making that uses activity based costing information to improve customer satisfaction and profitability Pricing & Product Mix Cost Reduction & Process Improvement Design Decisions Planning & Managing Activities

Answer 34

Allows managers to focus on how and where to reduce costs Can set cost reduction goals by activity Focus on removing “non-value add” costs

Answer 35

Can company find ways to decrease complexity Will customers pay for “less-complex” product

Answer 36

Managers compare budgeted to actual to evaluate how well activities were managed

Answer 37

system is a methodology that allows an organization to determine the extent to which its resources are used for 1) activities that prevent poor quality, 2) activities that appraise quality of products, and 3) activities that result from internal and external failures 1. Appraisal Costs - Conformance Costs 2. Prevention Costs - Conformance Costs 3. External Failure Costs - Non-conformance Costs 4. Internal Failure Costs - Non-conformance Costs

Answer 38

are associated with measuring and monitoring activities related to quality Product Testing Verification of Materials Quality Control Procedures Conformance Cost

Answer 39

are costs incurred to prevent or avoid quality problems Equipment Maintenance Employee Training Quality Planning Conformance Cost

Answer 40

are costs incurred to remedy defects discovered by customers Repairs and Servicing Warranty Claims Complaints Returns Non-conformance costs

Answer 41

are costs incurred to remedy defects discovered before the product or service is delivered to the customer Spoilage Scrap Rework Non-conformance costs

Answer 42

refers to units of production that do not meet the specifications required by customers for good units, and are discarded or sold at reduced prices Total Spoilage = (Beginning WIP+Units Started) - (Units Completed+End WIP)

Answer 43

is residual material that results from manufacturing a product No difference made between normal and abnormal scrap Scrap is either attributed to a specific job or all jobs Scrap is either recognized at the time of sale or time of production NO COST is assigned to scrap

Answer 44

refers to units of production that do not meet the specifications required by customers, but are subsequently repaired and sold as finished goods Difference made between normal and abnormal rework Rework is either attributed to a specific job or all jobs

Answer 45

is spoilage inherent in a particular production process. This type of spoilage arises even when a process is carried out in an efficient manner, and spoilage costs are included as cost of good units

Answer 46

is spoilage that is not inherent in a particular production process and would not arise under efficient operating conditions, and these costs are not considered inventoriable

Answer 47

There is no entry, treated as a normal cost in WIP

Answer 48

Debit: Loss from Abnormal Spoilage Credit: Work in Process

Answer 49

Specific Job – Normal Spoilage Debit: Materials Control (@ disposal value) Credit: Work in Process Control (Job 1) All Jobs – Normal Spoilage Debit: Materials Control (@ disposal value) Debit: Overhead Control (total value - disposal) Credit: Work in Process Control (total value)

Answer 50

Debit: Materials Control (@ disposal value) Debit: Loss from Abnormal Spoilage (total value - disposal) Credit: Work in Process Control (total value)

Answer 51

Immaterial Scrap Debit: Cash Credit: Scrap Revenue Material Scrap – Specific Job Debit: Cash Credit: Work in Process Control Material Scrap – All Jobs Debit: Cash Credit: Overhead Control

Answer 52

Specific Job Debit: Materials Control Credit: Work in Process Control All Jobs Debit: Materials Control Credit: Overhead Control Scrap When Sold Debit: Cash Credit: Materials Control Scrap When Reused Debit: Work in Process Control Credit: Materials Control

Answer 53

Normal Rework – Specific Job Debit: WIP Control (Job 1) Credit: Materials Control Credit: Wages Payable (DL) Credit: Overhead Allocated' Normal Rework – All Jobs Debit: Overhead Control Credit: Materials Control Credit: Wages Payable (DL) Credit: Overhead Allocated

Answer 54

Abnormal Rework Debit: Loss from Rework Credit: Materials Control Credit: Wages Payable (DL) Credit: Overhead Allocated

Answer 55

is a quantitative expression of a proposed plan of action by management for a specified period of time and an aid to coordinate what needs to be done to implement that plan A budget consists of both financial (revenues, expenses, cash flows) and non-financial (production, purchasing, employee) elements

Answer 56

● Promotes Coordination and Communication ● Provides framework for judging performance ● Motivates managers and other employees

Answer 57

● Mismatch in incentives between different levels of management ● Time consuming

Answer 58

is the difference between actual results and expected performance (budgeted performance)

Answer 59

has the effect of decreasing operating income, relative to budget

Answer 60

has the effect of increasing operating income, relative to budget

Answer 61

The full variance between the static budget and the actual budget

Answer 62

calculates budgeted revenues and costs based on the actual output during the budgeted period (and prepared at the end of the period) A flexible budget represents the hypothetical budget a company would have used if it could predict sales/output exactly Allows managers to view variances through two separate lenses – a flexible budget variance and a sales-volume variance

Answer 63

is the difference between a flexible budget amount and the static budget amount 𝑺𝒂𝒍𝒆𝒔 𝑽𝒐𝒍𝒖𝒎𝒆 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 = 𝑭𝒍𝒆𝒙𝒊𝒃𝒍𝒆 𝑩𝒖𝒅𝒈𝒆𝒕 𝑨𝒎𝒐𝒖𝒏𝒕 − 𝑺𝒕𝒂𝒕𝒊𝒄 𝑩𝒖𝒅𝒈𝒆𝒕 𝑨𝒎𝒐𝒖𝒏𝒕

Answer 64

is the difference between actual results and the corresponding flexible budget amounts 𝑭𝒍𝒆𝒙𝒊𝒃𝒍𝒆 𝑩𝒖𝒅𝒈𝒆𝒕 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 = 𝑨𝒄𝒕𝒖𝒂𝒍 𝑨𝒎𝒐𝒖𝒏𝒕 − 𝑭𝒍𝒆𝒙𝒊𝒃𝒍𝒆 𝑩𝒖𝒅𝒈𝒆𝒕 𝑨𝒎𝒐𝒖𝒏𝒕

Answer 65

is the difference between actual price and budgeted price 𝑷𝒓𝒊𝒄𝒆 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 = 𝑨𝒄𝒕𝒖𝒂𝒍 𝑷𝒓𝒊𝒄𝒆 − 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑷𝒓𝒊𝒄𝒆 ∗ 𝑨𝒄𝒕𝒖𝒂𝒍 𝑸𝒖𝒂𝒏𝒕𝒊𝒕𝒚 𝒐𝒇 𝑰𝒏𝒑𝒖𝒕𝒔

Answer 66

is the difference between actual input quantity used and the budgeted input quantity 𝑬𝒇𝒇𝒊𝒄𝒊𝒆𝒏𝒄𝒚 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 = 𝑨𝒄𝒕𝒖𝒂𝒍 𝑸 𝒖𝒔𝒆𝒅 − 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑸 𝒖𝒔𝒆𝒅 ∗ 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑷𝒓𝒊𝒄𝒆